debt ceiling

The so-called “Budget Control Act of 2011” (assuming both the GOP and Dem caucuses in Congress agree) has the following provisions per Katie Pavlich at Townhall:

* More than $900 billion in deficit reduction over 10 years through discretionary spending caps . $350 billion of that comes from the Pentagon;

* Debt limit increased by at least $2.1 trillion — through 2013…see below for more on how that happens;

* Bipartisan super-committee is tasked with finding $1.5 trillion in deficit reduction by November 23 presumably through tax and entitlement reform. There will be 12 members of the super-committee. House Speaker John Boehner, R-Ohio, House Minority Leader Nancy Pelosi, D-Calif., Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., each get to pick three members;

* Congress must vote on recommendations made by the bipartisan Congressional deficit reduction committee by December 23;

* If Congress fails to pass the committee proposal, triggers are enacted that spur at least $1.2 trillion in cuts and those will be close to 50/50 split between domestic/defense spending. But the triggers exempt cuts to Social Security, Medicare beneficiaries and low income programs. The cuts will take effect on January 2, 2013.

So over a third comes from the Pentagon with the remaining two thirds or just less than $600 billion from other discretionary spending. You can ensure that Democratic politicians will try to frame that as granny being pushed over the cliff.

Also note what the “trigger” exempts. As noted then, over 50% or $600 billion in cuts would come from the Pentagon budget and the rest from other discretionary spending. No mandatory spending is touched. That means they can’t use the “I don’t know if [name of favorite government redistribution program here] checks will go out this month” scare tactic. But it also means no serious work will be done on the programs that are killing us – the entitlements. It also means almost a trillion dollars in cuts in defense spending if Congress doesn’t act before December 23 of this year.

Assuming both houses of Congress pass this and Obama signs it, how does it work?

* Immediately after passage of this bill, the president certifies the US government is within $100 billion of hitting the debt ceiling and is given authority to raise the debt ceiling by $400 billion.

* That also triggers a request to increase the debt ceiling by $500 billion — with a process in which Congress can vote to disapprove. The expected outcome: the president vetoes the disapproval, Congress fails to override the veto, and the President is given the authority to raise the debt ceiling by $500 billion.

* The second tranche comes in December. If the super-committee fails to produce a path to reduce the deficit by $1.5 trillion, or Congress fails to pass it, the president makes a request for the authority to raise the debt ceiling by $1.2 trillion. Congress votes to disapprove, the president vetoes it, Congress fails to over-ride the veto, he gets the authority to raise the debt ceiling by $1.2 trillion.

* OR the super-committee succeeds in finding anywhere between $1.2 trillion and $1.5 trillion in deficit reduction and Congress passes it. The president automatically is given the authority to raise the debt ceiling by an equal amount, with no disapproval process.

In the previous cite you saw the make up of the “Super Committee”. Can you really imagine them coming up with all those cuts? My guess is many will be of the Harry Reid variety, where he counted future war spending that we weren’t going to spend.

Also look at the process of raising the debt ceiling. Obama must veto any Congressional disapproval. In a political sense that’s almost as good as having a short term debt ceiling increase to feature during the re-election campaign, because that’s going to come up more than once.

Boehner issued a slide show to put out the GOP’s side of the argument for what they got. One thing not mentioned in Pavlich’s summary is the fact that the bill requires a vote in both the House and Senate on a Balanced Budget Amendment. I’ll just be the first among many to declare that DOA.

Here, according to Democratic and Republican sources, are the key elements:

A debt ceiling increase of up to $2.1 to $2.4 trillion (depending on the size of the spending cuts agreed to in the final deal).

They have now agreed to spending cuts of roughly $1.2 trillion over 10 years.

The formation of a special Congressional committee to recommend further deficit reduction of up to $1.6 trillion (whatever it takes to add up to the total of the debt ceiling increase). This deficit reduction could take the form of spending cuts, tax increases or both.

The special committee must make recommendations by late November (before Congress’ Thanksgiving recess).

If Congress does not approve those cuts by December 23, automatic across-the-board cuts go into effect, including cuts to Defense and Medicare. This "trigger" is designed to force action on the deficit reduction committee’s recommendations by making the alternative painful to both Democrats and Republicans.

A vote, in both the House and Senate, on a balanced budget amendment.

Of course we’ve seen deals much like this before. Committees never seem to get around to the promised business and triggers never seem to get pulled and, as anyone would tell you now, the balanced budget amendment will never pass. Meanwhile, Obama is authorized to spend another 2 plus trillion we don’t have.

That’s twice now that the Democratically controlled Senate has rejected the GOP House’s plan on the debt ceiling and debt.

The onus, now, is on the Senate to do something. That means Democrats and Harry Reid.

Feeling all warm and fuzzy about that right now? After all, it’s been about 900 days since Senatorial Democrats have offered up a budget – one of the primary duties of Congress. In fact they’ve instead spent all their time rejecting Republican proposals and then tried to blame Republicans for inaction and intransigence. The irony, of course, apparently escapes them.

The 59-41 vote, on a motion to table the resolution passed by the House less than two hours before, ran mostly along party lines, easily reaching the simple majority required to sink legislation in the upper chamber.

Boehner’s office said the Senate’s refusal to take up the House plan puts the blame on Democrats if the U.S. defaults.

“For the second time, the House has passed a reasonable, common-sense plan to raise the debt limit and cut spending and, for the second time, Sen. [Harry] Reid [D-Nev.] has tabled it," spokesman Michael Steel said in a statement. "The responsibility to end this crisis is now entirely in the hands of Sen. Reid and President Obama.”

Hard to argue otherwise, wouldn’t you say?

Of course this isn’t the end game, but Senate Democrats have to pull a few Republicans into the game before they can execute it and escape blame:

Senate Democrats’ strategy is to send such a compromise vehicle back to the House on Tuesday, which would put intense pressure on House GOP leaders to accept it or risk a national default after Aug. 2.

If Reid can persuade at least seven Republicans to join the Democratic caucus in passing debt-limit legislation, it would give him the upper hand in the standoff with Boehner.

Chicken Politics … all bloody chicken politics. If 7 Republicans join Reid, they’ll have sold Boehner and the rest of the GOP down the river. If they don’t, Reid and Obama are going to try to blame Senatorial Republicans for any default.

As we watch the political theater that are these debt limit negotiations (and yes, I know the seriousness of all this, but this is political theater), it is interesting to watch the narratives being developed. On the left, the narrative they’re trying to push is the GOP is a bunch of intractable anti-tax zealots who don’t know how to say “yes”. On the right, the narrative seems to be … *sigh*, “no, we’re not.”

This is a game the GOP often plays – letting the other side frame the debate.

In fact, of the two sides, it is only the GOP that has actually put forward a plan. The president has certainly not put forward anything. He’s winging it. And Senate Democrats haven’t put up anything. They’ve simply refused to ratify the GOP plan (passed in the House – Cut, Cap and Balance (CCB)).

So who is the problem here? We have a GOP plan, we have no plan from Democrats or the White House. From them, all we have is grousing about the GOP plan and claims they won’t say yes to anything. Well, not true – they said “yes” to CCB, both in the House and the Senate. The only party that hasn’t said “yes” to it or anything is that of the Democrats.

Liberals say this is good for Obama because it shows GOP recalcitrance. Conservatives say that he has remained so committed to enormous tax increases that he tanked the very possibility of a deal. Time will tell, but it strikes me that the heated rhetoric he is using—”I didn’t get my phone call returned,” “I’ve been left at the altar,” “there’s nothing Republicans will say yes to”—does not suggest he, Obama, feels he has been handed a gift by Boehner and the GOP. He claims to have put $1.5 trillion in cuts on the table, plus $600 billion in entitlement reductions, in exchange for tax increases of the same size. He says Republicans said they would accept a dollar in higher taxes (or “revenue”) for every four dollars in cuts, which isn’t exactly saying “no’” to everything.

No, I’d say those who are saying “no” are Dems who want “increased revenues” and won’t take anything less than their version of that (and yeah, I’m not happy with the GOP talking about any sort of tax increase – but the claim here is that the revenues they’re agreeing too won’t come via tax increases per se, but tax reform.).

So:

For their part, Republicans in the House passed their cut, cap and balance bill on Wednesday, and it included an increase in the debt ceiling, so even by his own account his criticisms of the GOP are not accurate.

President Obama on Friday kept up the pressure on Republicans to agree to revenue increases in a deal to raise the debt ceiling, claiming 80 percent of the public supports Democrats’ demand for tax increases.

"The American people are sold," Obama said. "The problem is members of Congress are dug in ideologically."

Throughout the press conference, Obama blasted Republicans for ignoring what he said is the will of the American people by rejecting tax increases that would balance out spending cuts in a debt package.

This is typical Obama – when he doesn’t get his way, he claims things which aren’t true and shoots at the other side with things like the Congress is “dug in ideologically”. In fact the Republicans who won Congress are merely doing what they said they’d do. But the point is that Obama uses his bully pulpit to, well, bully instead of talking like a statesman and and pushing for a compromise solution. There is no one more “dug in” ideologically than the man accusing others of this supposed “sin”.

Americans’ preferences for deficit reduction clearly favor spending cuts to tax increases, but most Americans favor a mix of the two approaches. Twenty percent favor an approach that relies only on spending cuts and 4% favor an approach that uses tax increases alone.

Two months ago, The Hill conducted its own poll that showed opposition to tax hikes at 45%, with only 13% favoring an even split between tax hikes and spending cuts to solve the deficit problem, with another 11% supporting a 2/1 split for spending cuts to tax hikes, and 15% for a 3/1 split. Even under the most liberal (pun intended) definition of “balanced,” only 39% in that poll opted for the idea.

So there certainly isn’t any 80% clamoring for tax increases. In fact almost half want to see a huge reliance on spending cuts with few wanting it done with tax increases. As we’ve noted here before, once the spending cuts are made – actually made, done and done – then it may be time to talk about tax increases. Maybe. But until the spending cuts have actually, positively been made, the “need” for increased taxes aren’t at all going to be something the American people are “sold” on.

"I do not understand what I think is the maligning and maliciousness [toward] this president,” said Jackson Lee, a member of the Congressional Black Caucus. “Why is he different? And in my community, that is the question that we raise. In the minority community that is question that is being raised. Why is this president being treated so disrespectfully? Why has the debt limit been raised 60 times? Why did the leader of the Senate continually talk about his job is to bring the president down to make sure he is unelected?”

Obviously Ms. Jackson Lee was in hibernation during the 8 years of the Bush administration when the word “incompetent” was almost used routinely with his name. Of course the point Jackson Lee is making and something we’ve seen used time and again by the left when they are out of credible ammo is the race card.

"I am particularly sensitive to the fact that only this president — only this one, only this one — has received the kind of attacks and disagreement and inability to work, only this one," said Jackson Lee from the House floor.

"Read between the lines," she continued. "What is different about this president that should put him in a position that he should not receive the same kind of respectful treatment of when it is necessary to raise the debt limit in order to pay our bills, something required by both statute and the 14th amendment?"

Reading between the lines I only see cluelessness and the usual leftist tactics.

On exiting the room, Obama said that “this confirms the totality of what the American people already believe” about Washington, according to a Democratic official familiar with the negotiations, and that officials are “too focused on positioning and political posturing” to make difficult choices.

That line could be the summary of the Obama presidency to this point. Think Afghanistan for instance. Remember this:

The withdrawal has created deep divisions in Washington. The defence secretary, Robert Gates, argued for a modest reduction – at one point as low as 2,000 – citing the advice of US commanders in Afghanistan that they need to protect gains made during the winter against the Taliban.

But senior White House staff, conscious that the president has an election to fight next year, argued in favour of a reduction that would send a signal to the US public that an end to the war is in sight.

The “difficult choice” would have been to keep the troops in place and reinforce the success they’ve been having. Instead, we got the “positioning and political posturing” decision made to hopefully enhance Obama’s re-election chances.

Certainly, there is political posturing going on all over the place by both parties, but when the GOP actually sticks to its guns (no new tax increases) while playing hardball, how does that “confirms the totality of what the American people already believe?” I don’t think he understands which side of that statement he’s actually on.

One of the easiest ways to identify an amateurish negotiator is the issuance of obviously empty threats. Yesterday, Barack Obama issued one of the emptiest political threat in modern American history when he stomped out of the debt-ceiling negotiations yesterday in a fit of pique:

“Eric, don’t call my bluff. I’m going to the American people with this.”

Really? Then Obama will be in for a very rude awakening when he finally meets the American people:

The people have been taking it to Barack Obama since the midterm elections. Maybe he should do less stomping and a lot more listening.

But listening isn’t one of his forte’s. Instead he likes to play games like this. I’m sure some sycophant will soon call what he did “gutsy”. Bottom line, the GOP has to hope he actually follows thorough on his threat because he is obviously not at all tuned into the American people who, as the links point out, have been stating their opinion for quite some time.

Obviously Obama thinks he can pull his campaign trail wool over the American public’s eyes one more time. But my reading is that public is in no mood for his oratorical mendacity. The swooning crowds of yore are no more. For 2 plus years Americans have been able to watch and assess this guy based on his actions, not his words. And if the “generic Republican” poll is any indication, they’re wanting change as badly now as they did when Obama was swept into office.

So – hang tough GOP, the polls say the American people are with you. Don’t fall for the political theater and cave to non-existent pressure. He’s the one the with problem. Make sure you remember that.

Cluelessness seems to be a fairly rampant disease among those who seem unable to peer objectively at reality and analyze it. They prefer to pretend they know what they’re talking about and unhelpfully prescribe exactly the wrong antidote every single time (in this case, more of what we’ve watched fail for two plus years). And, as it turns out, the New York Times editorial board is peerless among that group:

It was not surprising to hear the Republican presidential candidates repeat their tiresome claim that excessive government spending and borrowing were behind Friday’s terrible unemployment report. It was depressing to hear President Obama sound as if he agreed with them.

And the NYT’s claim as to why that’s not the case?

There has never been any evidence that the federal debt is primarily responsible for the persistent joblessness that began with the 2008 recession. The numbers have remained high because of weak consumer demand and stagnant wage growth, along with an imbalance between jobs and job skills.

Who has ever argued that “federal debt is primarily responsible for the persistent joblessness?” Certainly there are other factors. However, there’s no question that excessive government spending – i.e. borrowing to spend – has had a hand in the stagnation we’re now undergoing. In fact, increased and excessive government spending has had no effect and, given the promises made, could be argued to have had a negative effect.

The debt is the indicator of the problem – excessive and unaffordable spending. As we’ve been pointing out for months, revenue isn’t the problem – spending is. So pointing to this strawman, as the NY Times does, is just more politics from the side who thinks it prudent to penalize those who produce in order to bail out those who spend what they produce (and the reason the Democrats insist on calling the present income tax levels “Bush tax cuts”). What doesn’t seem to penetrate the thinking of those who continue to push this line is one of the reasons we’ve had weak consumer demand and stagnant wage growth is the unsettled business and regulatory atmosphere this administration has created in its 2 plus years. That, of course is pushed aside by the NYT in favor of this argument:

The president may have a nebulous approach to unemployment, but he is hardly indifferent to it. His re-election hinges on reducing it. It is hard to understand, though, why Mr. Obama has adopted the language of his opponents in connecting the economy to the debt. To his credit, he talked about the one step that would work — investing money in rebuilding the country. But the debt-ceiling ideas he is now considering would make that investment much less likely by pulling hundreds of billions of dollars out of the economy at precisely the moment when the spending is needed most.

Yeah, there’s absolutely no connection between the “economy” and the “debt” is there? Of course there is? And pretending that borrowing money we don’t have to push it out in the economy and calling it an ‘investment’ doesn’t fool most rational folks. The NYT even points out that the last time the money was thrown out there is it mostly went to service state debt which only delayed the inevitable. Now, apparently, that will somehow be different in the face of “weak consumer demand”. Really? And, of course, the jobs the NYT laments about aren’t private sector jobs but government jobs (state and local) which we all know are the engine of our economy (/sarc).

The types of increases in revenue that government should be encouraging are those that come from private sector jobs. They provide tax revenue from created wealth. They don’t require the government to borrow money to “invest” (i.e. borrow money, create jobs and then tax the jobs created with the borrowed money and claim “increased revenue”. Make sense to you?).

So while I don’t disagree with the Times when it says “his re-election hinges on reducing” unemployment, it appears the Times would opt for the easy and wrong way to do it – borrow more money, pump it into creating make-work jobs just long enough to get Obama past the 2012 election. Then, who care? Debt ceiling, increased drag on the economy’s GDP and all that stuff, forgetaboutit. Well, at least till they get this guy re-elected. Then, of course, I expect a clarion call by the Times wondering how this could have all be so mismanaged and spinning and twisting it, as they have in this editorial, so it all ends up being the fault of the Republicans.

"I have a more fundamental question. Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and anyone reasonably adept at arithmetic can calculate what the debt change is going to be. … [T]here is a major problem in cutting spending. … [I]t is inconceivable to me that we’ve put ourselves in this position. Why we are continuously going back to the well to continuously up the debt limit when we already predetermined what that limit has to be, and so, consequently, they’re trying to abrogate what the Congress did?"

It is a pretty fundamental question. What is the purpose of a debt limit – note the word, “limit” – if it only serves as a temporary point at which, when reached (again) Congress reconvenes and raises it almost automatically? It makes no sense. But then we’re talking about Congress and politicians here.

Greenspan’s point is dead on target. What is its purpose if not to limit spending to that amount or less? And what real purpose does it serve if it is continually raised?

The answer to the first is “political not policy” and the answer to the second, unfortunately, is “none.”

Write it off to me being cynical about what any politician says, but while I like what I hear from Rubio in this WSJ op/ed, I wonder if, in fact, he’ll end up sticking to his guns:

Americans have built the single greatest nation in all of human history. But America’s exceptionalism was not preordained. Every generation has had to confront and solve serious challenges and, because they did, each has left the next better off. Until now.

Our generation’s greatest challenge is an economy that isn’t growing, alongside a national debt that is. If we fail to confront this, our children will be the first Americans ever to inherit a country worse off than the one their parents were given.

Current federal policies make it harder for job creators to start and grow businesses. Taxes on individuals are complicated and set to rise in less than two years. Corporate taxes will soon be the highest in the industrialized world. Federal agencies torment job creators with an endless string of rules and regulations.

So to summarize, Rubio sees a need to find ways to help the economy grow and to keep the national debt from not growing. Okay, sold. Next he sees existing federal policies – those, one assumes, include taxes and regulations – as one of the main obstacles to economic growth and one of the main contributors to national debt. Again, check. I think, in the main, he’s right.

Here’s the QotD:

We’re therefore at a defining moment in American history. In a few weeks, we will once again reach our legal limit for borrowing, the so-called debt ceiling. The president and others want to raise this limit. They say it is the mature, responsible thing to do.

In fact, it’s nothing more than putting off the tough decisions until after the next election. We cannot afford to continue waiting. This may be our last chance to force Washington to tackle the central economic issue of our time.

Well yes and no. The defining moment in American history seems to arrive every couple of years when Congress routinely raises the limit again and again. We’re now at a level that almost matches the yearly GDP with no end in sight if you look at the projected budgets for the next 10 years. So is this particular vote on the debt ceiling really a “defining moment in American history”? Only if Congress refuses to raise it. Otherwise, it is business as usual.

Wit ill it be business as usual or a “defining moment in American history”? I agree with Rubio that as it stands Congress and the president have obviously decided covertly that they’re not going to “tackle the central economic issue of our time” at the moment. So where does that leave Rubio?

Well, here’s his position:

I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid.

No tax reform, regulatory overhaul, cuts to discretionary spending, balanced budget amendment as well as reforms to save Social Security, Medicare and Medicaid, no Rubio “yes” vote?

That’s what his statement says to me and anyone familiar with the “goings on” in Congress know -given Rubio’s list of “must haves” before he’d vote “yes” – it is a virtual impossibility. Not going to happen – at least not anytime soon.

I would then deduce that Rubio is a permanent “no” on any legislation coming along in oh, the next 20 years, that raises the debt ceiling. Because, watching politics in Washington for all these years has convinced me that until it all crashes and burns, those folks aren’t going to really do a thing.

And I think Rubio knows it too:

Whether they admit it or not, everyone in Washington knows how to solve these problems. What is missing is the political will to do it.

I’ve seen no indicator that there is now a real will to do it, even after the wave election washed over 60 Republican freshmen into the House and upped the minority numbers for the GOP in the Senate. Oh there’s talk, of course, but I see the usual turf protection and re-election concerns already beginning to cloud the once clear mandate that said “fix this mess”. I see knees becoming weak and spines beginning to buckle.

Rubio stakes out a pretty unambiguous position here – not that I think he’s going to be able to stop the debt ceiling from being raised. On the contrary, I think we’ll see it raised many more times in the coming years. But I’m wondering how true Rubio will remain to his pledge here. It will be an interesting exercise to watch a supposedly principle driven and incorruptible Tea Party candidate work in the atmosphere of Washington DC that almost demands “team play” and compromise to “get along” or advance. He and Rand Paul, along with Allen West (R-FL) in the House are my “white mice” in this Tea Party experiment. I want to see how true they stay to their pledges, how well they resist the Washington gravitational pull and resultant sell-out that usually occurs.

The US debt is on track to hit a congressionally proposed debt ceiling of 14.3 trillion dollars by the end of February, the Treasury said Wednesday, a day ahead of a key vote to raise it to that level.

“Based on current projections, Treasury expects to reach the debt ceiling as early as the end of February. However, the government’s cash flows are volatile, making it difficult to forecast a precise date,” the Treasury said in a statement.

This isn’t the old debt ceiling of $12.374 trillion. Nope, this is the new one that the Senate approved (and still awaits House approval) that adds $1.9 trillion to the ceiling. By the end of February they’ll apparently have spent another $2 trillion or so. In case you’re wondering, that proposed debt ceiling finally puts our total debt at 100+% of our GDP. We finally owe more than we make.

And yes, both political parties have added to this – but none like the present one.

None.

Guess what – with the “jobs bill” in the wings, they’re going to want to raise that ceiling again since we’re borrowing $0.42 cents for every dollar spent by government.

And they wonder why there are tea parties and the natives seem restless, angry and “ungovernable”.

The Treasury Department said Wednesday it expects to hit the government’s debt ceiling by the end of February, putting pressure on Congress to raise the limit from its current level of $12.4 trillion.

Still not good at all, but not at all what the AFP claimed. So to quote SNL’s Emily Litella – “nevermind” -well, until they finally do spend to the new limit which most likely won’t be that far in the future (see upcoming “jobs bill” or “health care reform” if they manage to sneak that through – your choice).